With Customers, Silence Is Not Golden

In their frenzy over customer activity -- tracking, collecting, analyzing and responding immediately to it -- e-tailers are overlooking a key indicator in the race to gain market share. What customers do provides valuable insights, but what customers aren't doing can be equally critical, or even more critical, to success. Customer inactivity may be the most reliable indicator of what's wrong with your customer relationships, and what you need to change immediately.

E-businesses face the predicament of employing typically impersonal communication channels to build collaborative relationships with their customers. Particularly for e-tailers that sell products subject to consumers' discretionary whims, the greatest challenge is to gain customer loyalty amid the crowded field of competitors. Clicks-and-mortar companies that provide essential services such as banking to distinct local or regional areas are less likely to lose their customers to the click of a mouse. The largest hurdle for these more traditional companies with newly established online services is how to maintain low attrition rates.

To better understand and respond to their customers' needs, companies are finding that customers' silence often reveals more about them than their actions. While customers' actions reveal their preferences and what companies are doing right, customers' failure to act sends powerful signals about their dissatisfaction with the company and can often reveal what they're likely to do next. By focusing on what customers don't do, companies can spot and react quickly to specific threats and opportunities, leading to fewer defections and greater profitability. In an increasingly interactive world where face-to-face contact is limited, customers are more likely to defect without warning.

Leveraging loyalty. A national wine e-tailer wanted to find reliable ways to convert buyers into long-term customers, increase the frequency and dollar amount of customers' purchases and continue to keep its high-value customers happy. By analyzing online interactions with its customers, the company hoped to identify factors that distinguished sporadic buyers from those who evolved into regular and high-value customers. Customers who failed to make another purchase soon after their second sale, for example, rarely became regular customers. Sixty percent of those who remained inactive for 90 days or more never made another purchase from the company's Web site.

By tracking customer inactivity, the wine e-tailer also found that once customers made a third purchase, most continued to buy their wine through the Web site for the next three to four years, spending about $95 per visit. Recognizing the threats represented by long periods of inactivity following a second sale, the company took action to prompt these customers to come back a third time.

Similarly, a major financial services company recently discovered through observing its customers' inactivity that even the subtle drop-offs in certain customer activities can signal a serious threat. A high-value customer who suddenly curtails use of his ATM card or misses a regular check deposit may be expressing his dissatisfaction with the company and even his intention to defect. Without immediate attention from a friendly service representative, the customer could be at risk of jumping to the competition.

The meaning of silence. E-tailers that focus only on customer activity miss the strong, mostly negative, signals that customers send through drop-offs in their activity levels. By continually honing in on such factors as declining site visits, frequency and dollar amounts, and departures from their individual customers' typical behavior patterns, e-tailers can detect dissatisfaction or waning loyalty while it's still possible to avoid losing customers forever.

E-tailers should view inactivity as a potential symptom of specific problems with their business, and use all the tools at their disposal to uncover its underlying causes. Drop-offs in activity can reveal flaws in their customer service, such as product offerings and delivery systems, or can point out misjudgments about relevant consumer trends or individual customer needs.

By actively tracking its individual customers' inactivity, the wine e-tailer was continually prompted to look deeper into variables that potentially could affect all its customers. It subjected its marketing efforts, wine prices, selection and taste, onsite interactions and wine delivery times to serious scrutiny. Lapses in activity even spurred the company to place personal phone calls to some of its highest-value customers to inquire about what the company could do to better meet their needs and maintain their business.

Go with the flow. Unfortunately, too few e-tailers today actively track and interpret their customers' inactivity levels because they simply don't understand what a valuable tool it can be in converting lapsing customers into loyal ones. While the Internet offers the ability to capture up-to-the-minute information about customers instantaneously, most companies don't actually know their present rate of attrition. They instead receive only occasional updates on the subject, often too late for them to bring back those disaffected customers.

Armed with a constant flow of current information that zeros in on dissatisfied customers, companies can identify specific problem areas and potential imminent threats. When a customer's inactivity is tracked against his typical behavior patterns, it often becomes clear whether he is experiencing a lull or truly plans to defect to a competitor. Depending on his lifetime potential value, companies can launch pre-emptive strikes -- through e-mail, fax, screen pop-ups or whatever it takes -- that address concerns long before the customer becomes another statistic on a quarterly report.

E-tailers need every tool available to understand their customers and respond immediately and appropriately to their needs. Strangely enough, strict attention to what they don't do may be the best way to keep their customers happy.

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